Vashon-Maury Island Beachcomber

Park district erred in its handling of finances, fields project, auditors say

The Vashon Park District failed to curb expenses when revenues fell, kept itself afloat by borrowing money and did not comply with state laws governing the administration of a public construction project, state auditors have found.

In a report delivered to the five-member board Tuesday night, two auditors from the Washington State Auditor’s Office also said the district did not submit annual financial statements, as required by state law, and could not locate many of the records the auditors needed to fully review the small Vashon agency.

After the state agency received calls on its hotline about problems at the park district, those missing annual financial statements were a red flag that alerted auditors that a review might be in order, Dan Potapenko, the lead auditor for the park district’s review, told the commissioners.

“You have to tell the citizens how you’re doing financially,” he told the board. “They want to know.”

It’s the law to submit financial reports, he told them. “But I also think it’s a good idea.”

Potapenko and Carol Ehlinger, audit manager for the state, reported their findings to district’s commissioners at a meeting at the district’s Ober Park office. About 60 people attended the meeting, though the auditors did not take questions from the audience.

In both their briefing Tuesday night and their written report, the auditors did not suggest the commissioners acted with criminal intent or committed violations that would prompt the auditors to turn their report over to the state Attorney General.

But the team took issue with the way the commissioners handled the agency’s finances and oversaw its fields project north of town and several times noted they failed to follow state laws or administer according to best practices. They also noted the park district’s dire financial situation and questioned the commissioners’ decision to cover the shortfall by borrowing money.

“In December 2012, the district did not have sufficient funds to repay a $404,000 bank loan, make $66,484 bond debt payments and pay about $70,000 of outstanding bills,” the draft audit report states. “To meet its immediate cash needs, the district obtained a credit line from a bank and used $200,000 of it.”

Had the district prepared timely financial statements, the commissioners would have discovered they were heading into difficult terrain and been able to “make meaningful decisions,” the report states.

“When tax and other revenues fell short of projections, the commissioners did not take timely action to adjust revenue expectations and reduce costs,” the report adds.

Both in the report and in their comments to the board, the auditors encouraged the commissioners to end their practice of borrowing money to cover regular operating expenses. The practice “is not advisable,” Potapenko told the board. Should lenders balk, he said, “Who’s going to bail you out?”

But when Potapenko encouraged the board to develop a reserve large enough to cover 30 to 60 days of park district operations, Commissioner Bill Ameling bristled, suggesting that “squirreling away” taxpayers’ money is not a good idea.

“Have you ever run a park district?” Ameling asked, a comment that provoked both gasps and laughter from the audience. “In all due respect,” Ameling added, “I think you’re crossing the line and talking about something you don’t have experience with.”

The auditors also expressed concerns about the way the park district has handled the fields project next to The Harbor School, a project that is behind schedule and over budget, according to the latest figures provided by park district staff. The park district received a $500,000 grant from the state, certifying in a letter submitted to the state that it had $628,876 in matching funds — the required match for the project — and that the funds were “ready and available.”

But in fact, the report states, “The district did not have the matching funds on hand.”

What’s more, the auditors said, the district did not follow laws governing the administration of a public works project, choosing to act as the project’s general manager and splitting the work into smaller pieces, apparently to avoid competitive bid requirements. The district hired a construction consultant “with no prior experience managing government construction projects.” And when it awarded a bid for earth-moving work, it chose the highest of the two bidders, “contrary to state law,” the report said.

During a give-and-take at the meeting, Commissioner David Hackett told the auditors that the park district “had some problems and got in over our heads.” But he and Ameling both questioned the auditors’ findings that it was wrong to split up the big project into smaller pieces.

“We might be guilty of not crossing all the ‘t’s’ and not dotting all the ‘i’s,’ but there’s no evidence that anyone was harmed,” Ameling told Potapenko.

When he worked as a general contractor, Ameling said, he routinely added 10 to 15 percent to the project’s costs. By the park district acting as the general contractor, Ameling asked, “Is it possible we saved the taxpayers 10 to 15 percent?”

“I doubt it,” Potapenko answered.

“If you decide to do another public works project, you might want to familiarize yourself with public works laws,” he added.

The commissioners, in a printed response included in the auditors’ draft report, said they believe the auditors’ statements about the bidding process and cash available for the project were incorrect. Staff turnover at the agency, the commissioners noted, “greatly hampered the ability of VPD to respond to audit questions.”

“The records of the project were not well-maintained and created some substantial confusion regarding the project,” they added.

At the same time, the commissioners said in their written response, “These errors are of little consequence … because the larger conclusion of the audit that VPD did not manage this project as well as it should have is apparent. We look to greatly improve this situation as we complete the project over the next several years.”

Ameling, who has served on the park district commission for 26 years, seemed frustrated by the audit, which will cost the park district $10,000. In an email he sent out prior to Tuesday’s meeting, he blamed The Beachcomber and a group of citizens that has become active in park district affairs for the audit. And just before the auditors left Tuesday night, he said to them, “Can we get a partial refund if we didn’t think it was worth $10,000?”

But other commissioners said the process was helpful. Lu-Ann Branch, the board’s vice-chair, called the audit “a good catalyst for conversation” and a process that will help the park district move forward.

“There was no criminal intent. There never was. There never has been,” she added. “I’m certainly not happy with how the fields project was managed, but now we’re in the process of fixing it and moving forward.”

Hackett, in comments emailed to The Beachcomber, said the audit highlighted what he believes was the park district’s greatest shortcoming — “poor financial systems and marginal management. I am very happy that we have taken definitive steps to address these problems.”

Joe Wald, the commission’s chair, did not return telephone calls or an email query.

Meanwhile, John Hop-kins, the board’s newest commissioner, called for a special meeting to be held Saturday to try to establish a plan and timeline for completing the fields project.

Tuesday night, after several members of the audience sparred with commissioners over the audit findings, Hopkins stood up. “We need to move forward,” he said to applause. “Let’s get the job done. Let’s stop bickering.”

Meeting called to plan fields project

The Vashon Park District, at commissioner John Hopkins’ urging, will hold a special meeting to discuss how to complete the agency’s multimillion-dollar fields project next to The Harbor School.

The public meeting, which will be facilitated by islander Craig Beles, will take place from 9 a.m. to noon on Saturday at Ober Park. Commissioners Joe Wald, who chairs the five-member board, Lu-Ann Branch and Hopkins plan to attend.

Hopkins said he hopes representatives from those groups with the biggest stake in the fields project — baseball, soccer and lacrosse — will attend. The goal, he said, is to emerge from the meeting with “an agreement on the best option to achieve our goal — playable fields that meet the state requirements so that we can get our grants.”

The agency needs to establish a timeline, milestones and a budget and build into the project plenty of oversight. “We want to follow the law and have enough money to keep a schedule,” he added.

Hopkins said he’s optimistic, in part because several community activists are working with the district to help it complete the project. “The people who are working on this are surprisingly dedicated and open,” he said.